Diwali festivities are just a few days away. It begins with the arrival of Dhanteras, which falls on Friday, the 13th of November this year. The day is considered auspicious for the purchase of gold, silver and utensils.
Without a doubt, gold has been the best performing asset this year, rising nearly 30 percent from the start of 2020. The uncertainty brought by COVID-19 pushed investors to park their funds in a safe haven asset like the precious metal.
On Tuesday, the yellow metal was trading at Rs 50,731 per 10 grams on MCX (Multi Commodity Exchange), which is a healthy correction compared to the over Rs 55,000 levels seen in August.
Despite the correction, gold prices in India are still looming at over Rs 50,000/10 grams levels. With rates at such historic levels, should you purchase gold in Dhanteras 2020?
Gold price forecast
According to a strategist's report on Daily-FX based on technical analysis of gold rates in the international markets, the prices are expected to remain in a falling wedge pattern that's been building for more than two months.
"Price action in Gold appears to be slipping below the bottom-side of the 1900-1920 zone, and underneath price action is another area of possible support running from 1859-1871," wrote strategist James Stanley.
Based on this analysis, prices are heading towards, $1,800 an ounce, a psychologically significant figure for international gold, that could influence where it goes from there. On Tuesday, US spot gold rates were trading at $1,908.02 per ounce.
An economist at OCBC Bank, Howie Lee, was quoted in a Reuters article saying that while gold's appeal as a safe haven is still in play due to a rise in COVID-19 cases in around the world, it is likely to stay close to the $1,900 level until the U.S. presidential election outcome becomes clearer.
From the technical front, Reuters technical analyst Wang Tao said that spot gold may end its bounce around a resistance at $1,912 per ounce and then retest a support at $1,887 an ounce.
Should you buy?
Gold prices in India imitate the movement of the metal's prices in the international markets, which means that any movement in the US dollar or the stock markets due to the upcoming US elections will move rates both internationally and domestically. So far, the rates are moving almost flat.
As for deciding whether or not to buy gold this Dhanteras, the precious metal is purchased on this occasion as a symbol of luck, prosperity and religious sentiment. There is sentimental interest in purchasing it and not for investment purposes.
You can therefore base your decision on your budget.
Things to note when you buy physical gold
- Check the purity of the metal before you make a purchase. The two ways to measure the purity of gold is karat and fineness. 24 karat is the purest form of the metal while 22 karat has 2 parts of another metal like silver or zinc mixed in it.
- Fineness is measured in purity in parts per thousand. For example, 24 karat gold will have a fineness level of 999.99.
- Another aspect to look out for is hallmarking. Hallmark certifies the level of purity of the metal. It is the official recording of the proportionate content of precious metals in an article.
The article is purely informational and is not a solicitation to buy, sell in securities mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.
About the author
Olga Robert is an M.Com graduate covering equity markets and personal finance for nearly three years. Her interests include tax planning, equities, DIY personal finance management and government schemes.